Malaysia lost its right to review water price after choosing not to do so in 1987: Shanmugam

Malaysia lost its right to review the price of raw water sold to Singapore after choosing not to do so in 1987, Foreign Affairs Minister K. Shanmugam said on March 6, 2014. -- ST FILE PHOTO: DESMOND LIM

Malaysia lost its right to review the price of raw water sold to Singapore after choosing not to do so in 1987, Foreign Affairs Minister K. Shanmugam said on Thursday.

Singapore thus welcomed the Malaysian Foreign Minister Anifah Aman's recent statement that they would honour the 1962 Water Agreement and that any review of water pricing is possible only if Singapore also agreed to it, he added.

Mr Shanmugam was responding to a parliamentary question by Ms Ellen Lee (Sembawang GRC), who had asked whether the bilateral water agreement allowed for Malaysia to raise the price of raw water sold to Singapore at any time before its expiry in 2061.

Singapore's stand, conveyed to the Malaysian government on several occasions, is that neither country could unilaterally change the price of water sold to Singapore, just as neither could change any of the terms of the 1962 agreement.

Mr Shanmugam, who also holds the law portfolio, said: "This is no ordinary agreement. It was guaranteed by both governments in the Separation Agreement in 1965, which was registered with the United Nations.

"Both countries have to honour the Water Agreement and the guarantee in the Separation Agreement. Any breach of the Water Agreement would also be a breach of the Separation Agreement and of international law."

Turning to Singapore's position that Malaysia had lost its right to review the water price, the minister traced it to 1987. This was 25 years after the 1962 agreement, when there was a right to review the price jointly.

"However, Malaysia consciously chose not to review the price. It had good reasons for this," he said.

One reason is that Malaysia benefits greatly from the current pricing arrangement, he noted. Johor buys 16 million gallons a day of treated water back from Singapore at 50 sen for every 1,000 gallons.

This price is only a fraction of the true cost to Singapore for treating the water, which includes building and maintaining the entire infrastructure of water purification plants, Mr Shanmugam noted.

He said: "Malaysian leaders have acknowledged that Malaysia benefits from the current arrangement, and explained that indeed was why Malaysia made a carefully considered decision not to review the water price in 1987."

As an example, he pointed out that in 2002, then Malaysian Prime Minister Mahathir Mohamad was reported as saying Malaysia did not revise the water pricing when it was due, because it thought that Singapore would also revise the price of treated water supplied to Malaysia.

In the same year, then Johor State Assembly Speaker Zainal Abidin Mohamed Zin said that the Johor Government had not made a mistake in not pressing for a review in 1986, citing similar reasons.

The minister said that had Malaysia exercised the right to review the water price in 1987, Singapore might then have made different investment decisions to develop Johor River. But it did not, "and on that basis, Singapore then took several actions, which also benefited Malaysia", he noted.

One example is building Linggiu dam in 1990 at a cost of more than $300 million. This has raised the yield of the Johor River and enabled both Johor and Singapore to draw water from it during the current dry season, he said.

Mr Anifah had said: "An agreement is an agreement. When there is an agreement, we will honour the agreement. If there is any need for review, we will forward it and if their response is positive, we will start talking."

Mr Shanmugam said Singapore welcomes the statement, adding: "It reaffirms the position Malaysia has taken previously on honouring the agreement - and indeed that cannot be in any doubt - and acknowledges that a review of the water price is possible only if Singapore agrees to such a review."

He also told Ms Lee that it was premature to speculate on the impact on bilateral relations of a reported proposal by the Johor government to review the water price.

He said: "We have only heard of this proposal from media reports emanating from Johor. But there have been no official approaches from Malaysia on this issue."

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